FTSE 100 businesses give EU reform and renegotiation a big boost

Whenever EU reform and renegotiation are being debated, one of the most powerful claims made by the status-quo side is that it would generate uncertainty which would be bad for business.

Well today's FT reports that according to a survey of one in three FTSE100 chairmen conducted by Korn Ferry, a leadership and talent consultancy, the overwhelming majority - 81% - said the want to see the UK renegotiate its relationship with the EU. In comparison, only 15% back staying in no matter what and 4% supporting an outright exit. There was naturally a range of views in terms of how far-reaching the renegotiation ought to be; some business leaders backed only "limited" changes, but a clear majority - 63% - backed "a return of social and economic power to nation states".

Although the business support for EU reform is not surprising - as our own pan-European business campaign for EU reform showed - the extent of support is considerable. This is particularly true since it comes from large corporations, which are often seen as gaining greater benefit from the current EU set up than small and medium sized enterprises, which bear a disproportionately larger burden from EU regulations. 

With such a strong mandate from business, it really is time for Cameron to ramp up his push for reform and flesh out exactly what kind of reform is desired, and how it can be achieved.

Timing, not substance, is the biggest obstacle to David Cameron's reform agenda

Our Director Mats Persson writes on his Telegraph blog:

In a recent Sunday Telegraph article that received surprisingly little attention at the time, David Cameron came close to setting out a “shopping list” of what he wants to change in Europe. He outlined seven areas, though they were more principles than policies: powers flowing back, a beefed-up role for national parliaments, less regulation and more free trade, limiting the influence of European judges (possibly opting out of the ECHR, which is not an EU institution), tightening welfare benefits for EU migrants, tougher controls on future EU accession countries and no more “ever closer union”.

Nick Clegg – in a strange kind of way – has almost endorsed the plan, saying that "Now [Cameron] doesn't even talk about repatriation, instead proposing a mild seven-point plan, most of which wouldn't even require treaty change." European Commission President Jose Manuel Barroso has said that the EU wants to "cater" to the UK without "threatening the Union’s coherence" (though he was all over the place on EU treaty change). And in the Financial Times this week, Jean-Claude Piris, former legal guru of the European Council – the key decision forum for EU leaders – concluded that Cameron's changes could pretty much be done without actually changing the EU treaties.

For Cameron, this is a double-edged sword. Sceptics at home already see Cameron’s starting position as a “sell-out” – mere presentational changes that will allow him to recommend a “Yes” vote in the 2017 referendum. This is a premature accusation as there’s a huge range within the Sunday Telegraph piece, from token reform to sweeping changes.

Cameron could cobble together a decent package without changing the EU treaties. First, areas like toughening up rules on access to benefits, removing trade barriers, signing free trade deals or scrapping red tape – key planks in Cameron’s renegotiation agenda – just fall under normal Brussels decision-making (which doesn’t meant it will be easy. Think European Parliament). Secondly, “repatriating” powers wouldn’t necessarily require EU treaty change but could still be meaningful, for example devolving the EU’s irrational regional policy (saving UK taxpayers £4bn over an EU budget period) or exemptions from maddening working time rules for the NHS.

Finally, the EU specialises in legal acrobatics. When pushed – say when the bloc’s second largest economy risks leaving – it can be amazingly creative. For example, it created a €440bn bailout fund out of thin air and via so-called political agreements, the Danes got four surprisingly effective opt-outs after having rejected the Maastricht Treaty in 1992, which were incorporated when the next EU treaty came around. Something similar can be done for some of the reforms currently being discussed, including giving national parliaments the right to block or revise EU laws.

So it's right that Cameron seeks to maximise the reforms that can happen without EU treaty change. However, not only would a Treaty change be a form of political insurance to the Tory party and public that things have changed but it's also needed since the treaties simply aren’t fit for purpose. With a more integrated eurozone, we need new organisational principles and practical measures to avoid the EU becoming the eurozone, while allowing powers to flow back to countries that wish to be less integrated. A 2017 referendum should be the start of a slimmed down, flexible Europe, not the end destination. A quick and dirty solution will only bring us back to where we are today – and could well generate a referendum result too close to call, solving nothing.

Ironically, the strongest and most plausible contender for a Treaty change is one measure that Cameron – oddly – didn’t mention in his piece: safeguards against the Eurozone writing the rules for the rest of Europe, which will also effectively kill the notion of "ever closer union". Exactly how this principle will be organised needs careful thought (ideas here), but it’s highly desirable that this principle is firmly enshrined in EU law.

Since it’s the eurozone that is now changing the rules via banking union and other measures, not the UK, Cameron would be given a fair hearing in national capitals on this point. It is conducive to a "grand bargain": the Germans and French solve their catch-22, agreeing to beefed up supervision in the Eurozone in return for Berlin underwriting the euro, while the British ask for safeguards against Eurozone stitch-ups in return for nodding through EU treaty change at 28 (which Berlin still prefers). In this scenario, it’s the German-led EU treaty change that may trigger a referendum in France, not the UK’s.

It's whether it can be done before 2017 that remains the biggest question.

France must take inspiration from David Cameron on Europe

This is the argument made in a very interesting op-ed penned by French MEP (and former Justice Minister) Rachida Dati, of the centre-right UMP party, for today's Le Figaro. We reported on the article in today's press summary, but we thought it was worth translating it (almost) in its entirety.

Here it is:

Is a new wind blowing through Brussels? The old myth of [European] federalism may be falling...The elite cheers the self-proclaimed 'Europeans', who, to preserve their post, write pamphlets lamenting this technocratic Europe, rejected by the peoples and origin of all populist movements. Some others want to change things, acting against the tide of the 'Brussels elite'. These are the modern, the courageous, the defenders of a realist Europe. David Cameron is one of them.

When he proposes to the British people a referendum on the UK's future in the EU, he acts responsibly. To deny [a referendum] to the British people, who are asking for it, would be the best means to exacerbate the anti-European sentiment that is on the rise not only across the Channel, but everywhere in Europe. When [David Cameron] proposes repatriating certain competences from Brussels to the national level, that's what we want too!

We believe, like David Cameron, that the future of Europe depends on it. It's with this same spirit that we must move forward with useful deregulation. David Cameron has had the audacity to put this idea onto the European agenda. Even [European Commission President] Barroso, the 'pusillanimous', has been forced to launch the REFIT programme, aimed at simplifying and easing EU law.

[...]

[French President] François Hollande is right to be cautious with the British offensive, which is good in the form, but whose exact outline we don't know yet. An ultra-liberal initiative would backfire against the people we say we are listening to. It is imperative to simplify [EU regulation] to boost the competitiveness of European businesses, especially SMEs. But this simplification must not be done to the detriment of certain rights of workers or the safeguard of citizens’ private life. However, this is a debate that deserves to be opened.

Ms Dati then goes on to address a specific EU policy area:

I plead for this simplification to be applied to the domain of energy as a matter of priority...The most serious problem [with EU energy policy] is the multiplicity of contradictory environmental, energy, and climate targets. Taken individually, these targets are laudable. But the facts have proven that, combined, they could cancel each other out - not to speak of the damage done to the competitiveness of our businesses. 

This is the case with renewable energy. Due to the subsidies it benefits from, the market is distorted as its use is prioritised. By their own nature, these sources of energy are intermittent, and cannot cope with energy demand on their own...I intend to make the ambition for a European energy policy that is more flexible in its targets and, finally, consistent, one of the priorities of the UMP's campaign for [next year's] European elections.

The UMP must finally stop hesitating about its European stance. We have never been listened to so much as when we knew how to talk and listen to the [French] people, particularly the popular classes. On Europe, they are asking us for a realist revolution. Let's listen to them!   

9%, 43%, 50%, 60%, 84%: How many domestic laws are linked to EU law? The case of Sweden

It's up there with the origins of the universe as one of the great existential questions of our time (well...): how many national laws stem from Brussels?

European Commissioner Viviane Reding - who does what she can to turn people against the EU - recently told a "Debating Europe" event in Sweden (H/T @AllieRenison):

Did you know that 80% of Swedish laws are not Swedish laws? They are European laws that have been translated into Swedish legislation.

In addition to the comment being ridiculous (it was in reply to a question about the EU costing too much)  she seems to have plucked this number out of thin air. Incidentally, it would top Nigel Farage's much-criticised claim that 75% of all UK laws are made in Brussels. Another example of Better Off Outers and Europhiles agreeing.

As regular readers will know, the Open Europe team has gone to hell and back trying to answer this question, and our conclusion is that it's virtually impossible to determine with any degree of certainty what the share of EU-derived laws is. It all depends on what you count, how you define an EU-derived law and what the counter-factual is.

It most certainly is higher than 9% as some claim. Counting UK Statutory Instruments, which is what the study from which this number is drawn from did, isn't that meaningful as there's no 1-1 correlation between that and EU law. It also doesn't include EU Regulations which, unlike Directives, are directly applicable, giving no rise to separate domestic legislation.

The 84% figure that is often cited originates from an answer to a German parliamentary question, comparing the number of new federal laws and new EU laws in one year. However, this is also too simplistic. For example, counting only federal laws in a federal system isn't particularly meaningful. Germany has 16 Länder that churn out laws as well.

Now, a new Swedish study has thrown in another number to debate. The Riksdag and Departement - the Swedish Parliament's in-house magazine - has reviewed 1,300 Swedish legislative proposals, dating back to 2005. It found that the share of legislative proposals in 2012 originating in the EU stands at 43% - a dramatic increase compared to 2010 when the share was 28%. Of the 104 laws that so far have been proposed by the Riksdag this year, about a third originate in the EU.

This is a quick and dirty study in many ways - it measures only the so-called flow of EU legislation, not its stock. And the flow clearly is subject to a lot of variation. Its proposals and not laws passed. And, as with the German study, it doesn't look at local rules. Local government is important in the Swedish system, with Councils (or municipalities) having plenty of decision-making power. So any serious "EU law count" would have to look at this dimension as well.

But, we're not done yet. A 2010 report by the Swedish Association of Local Authorities and Regions - who should know a thing or two about local decision-making - does address this very question. It says this:

The report shows that, on average, the EU affects 60 percent of items on municipal council agendas. The number is slightly lower for county councils and regions, where the EU influences around 50 percent of agenda items. 

Given that these are local decisions, it does sound high to us, but remember the report doesn't count laws per se, but issues considered by the local government in Sweden (public procurement considerations for example will always be influenced by EU law, despite it not necessarily giving rise to new local rules).

A few conclusions:

• Viviane Reding really must be on the UKIP payroll 
• It remains incredibly difficult to nail down exactly how many laws originate in the EU
• The share of EU laws is best measured in terms of domestic legislation "influenced by" or "linked to" EU decisions, ideally in combination with the measurable impact of these laws (our preferred way) to get a sense of the relative impact
• Any EU law count must also look at the local or regional level.
• Still, a h*** of a lot of domestic laws stem from the EU 

The war on EU red tape: Will this time be any different?

The headlines above speak for themselves. From time to time, the European Commission makes an announcement that it will make EU business rules "lighter", "simpler" or "smarter". But it deliberately stays away from the terms "deregulation" or "less regulation". They are usually a mixed bag, ranging from measures with real impact to irrelevant to even involving more regulation. To date, none of these initiatives have come anywhere close to achieving less, but better EU regulation across the board, that we and many businesses are calling for.

The European Commission has now unveiled the first results of REFIT - or its Regulatory Fitness and Performance Programme. Based on a 'screening' of the entire stock of EU legislation, the Commission has set out what it's planning to do (or not do) to make EU law lighter.

So will this time be different? Well, yet again, the proposal is a mixed bag.

The good stuff:

The Commission lists a number of proposals it has already put out, and are pending approval from member states and MEPs. Some of these would have a positive impact, including:

• Making EU public procurement rules more SMEs-friendly, mainly via the reduction of the paperwork needed to bid for contracts;
• Making it easier for professional qualifications to be recognised in different member states;
• A one-stop-shop for clinical trials.

The Commission also stresses it is already carrying out (or will do so in the near future) thorough evaluations of EU regulations in a dozen policy areas. These include:

• All EU rules on health and safety at work (no less than 23 separate Directives at the moment) - though the evaluation would only be published by the end of 2015;
• EU rules on temporary agency workers (which cost the UK economy around €2 billion a year);
• The Renewables Directive, which is dated and ridiculously micro-managing.

These rules are in desperate need of revision, so well done Commission for identifying them.

The not-so-good stuff:

Dropping proposals that are dead in the water: The Commission is offering to scrap proposals that are pending and unlikely to be adopted, which of course has no tangible impact as they haven't been adopted yet. Some of the proposals identified (e.g. a Directive simplifying VAT obligations or a Regulation on the statute of a European private company) have been pending for ages and were unlikely to ever come to pass.

Turning several rules into one rule:  The Commission also puts forth several ideas for the 'codification' and the 'consolidation' of existing legislation, meaning turning different sets of rules into one set of rules. As we pointed out in the past, if you merge ten existing directives into one, you definitely make the acquis more user-friendly, which has value in itself. However, if the substance of the rules remain, the impact on business will also remain pretty much the same, so this is of limited value on the ground.

More EU harmonisation: Somewhat cheekily, the Commission has also snuck in a proposal for more EU integration in a contentious area by presenting a Common Consolidated Corporate Tax Base as an example of simplification. Now, there may be a business-case for a CCCTB, but this also seems like back-door 'harmonisation' - which is a very different thing from 'simplification'.

In conclusion, so far there are some positive steps in here, but whether it will turn into a serious, de-regulatory exercise - with real impact on businesses - will very much depend on what comes out of the Commission's review and level of follow through.
     

Cameron tasks new new business body with sweeping away EU red tape

Will Cameron's new body cut through EU red tape?

David Cameron has just announced that he’ll set up a new “task force” consisting of some of the UK’s best business leaders. Their task is to identify EU rules and regulations that are currently holding back business and growth, which should therefore be scrapped.

We’re told it’s a government initiative rather than a Tory initiative, and it’ll be led by Business Minister Michael Fallon MP.

Apparently, the idea is to complement the balance of competences review – looking at individual rules from a business perspective rather than overarching EU powers.

Now, this will no doubt be met with cynicism. Politicians often blow smoke about cutting bureaucracy and promise to set light to “bonfires of red tape” but somehow the flames never materialise. Meanwhile, such 'taskforces' have a mixed record in terms of results to say the least. Will this time be the same?

In truth, it depends. If it’s an initiative meant to merely distract or fill a rhetorical vacuum, then No 10 will no doubt be called out – and the whole thing will backfire. But if it’s genuinely set up to get down to the real, practical EU rules holding back business – and more importantly is followed up by a very strong push in Europe, rather than attempts at getting quick headlines – then this is a most-welcome initiative. This will also depend on the actual people on the task force, and whether they’re closet status quo enthusiasts or genuine reformers. We’re told the following will be on the panel – we’ve included a summary on anything that’ve said on Europe:

Ian Cheshire, CEO, Kingfisher
Writing in the FT, a few days ago Ian Cheshire argued that “As an international retailer, Kingfisher wants Britain to remain in the EU – but a reformed EU… We enjoy the certainty of a single rule book across the EU but not at the cost of an ever increasing regulatory burden, which must be resisted”.

Paul Walsh, former CEO, Diageo Plc 
Speaking to the BBC’s Today programme, Paul Walsh has said "I support the fact that our prime minister said we should stay in Europe. We are a trading company. We must stay in Europe, we must position Europe for the future, which is more competitive, less regulation."

The others have not said anything in detail about the EU per se but also have considerable business experience in cross-border trade.

Marc Bolland, Chief Executive M&S

Has driven the opening of stores in Paris and other EU capitals, likely making him familiar with the constraints of expanding British business in Europe.

Dale Murray, Angel Investor 2011
Launched Vodafone New Zealand in 1992. Co-founded Omega Logic in 1999. Lots of experience as an entrepreneur and as a business investor. Experience in telecoms which is becoming a hot topic in terms of single market integration and trade.

Louise Makin, CEO, BTG

BTG has offices in Germany and previously President of Strategy and Business Development Europe at Baxters so she has solid background in conducting business across the EU.

Glenn Cooper, Managing Director, ATG Access

ATG Access is the worlds largest manufacturer of security bollards and vehicle barrier systems, currently exporting to over 42 countries.

So the jury is still out. But with the group set to provide its first concrete recommendations as soon as September we'll soon see, and given the huge importance of scrapping and improving EU rules and regulations we’ll give No 10 the benefit of the doubt on this one.

Got Milk? Writing the nanny-state into EU law

Cute babies banned from formula packaging

The European Parliament has agreed new rules that will regulate the labels and content of baby milk and foods.  Under these new rules, “pictures of infants, or other pictures or text which may idealise the use of such formula” will be banned from the packaging of baby formula – so no pictures of cute babies on the front.

In the UK, the use of babies’ pictures is already illegal for ‘infant formula’ (for those between 0-6 months), but is legal for ‘follow-on formula’ (for those between 6-12 months). The new EU rules will ban the use of pictures of infants for marketing on both types.

Why is this necessary? Well, according to the European Parliament’s view-point, mothers may not understand the value of breastfeeding, and thus need to be guided in case they are ‘discouraged’ from doing so by attractive formula packaging.

This just goes to show the extent to which EU legislation now touches on the most unexpected areas of people’s everyday lives. The recent attempt to ban re-usable olive oil containers from restaurants is another example. Thankfully, this ridiculous idea was dropped after widespread ridicule.

But the sheer volume of law and regulation emanating from the EU institutions shows why we need to strengthen the powers of national parliaments to properly scrutinise and block unwanted EU rules and, more importantly, to question whether these are things the EU should be doing at all.

Good news: Commission bottles it on olive oil ban

The first mention of olive oil stems from as early as the twenty-fourth century B.C. The Romans introduced elaborate measures to counter-act fraudulent practices in the olive oil trade. Many amphora fragments bear stamped inscriptions or handwritten notes that record information such where the oil was produced, the name of the producer, the weight and quality of the oil when the amphora was sealed, and the name of the merchant who imported it, the name of the imperial functionary who confirmed this information when the amphora was reopened at its destination in Rome, and so on. Fast-forward a couple of thousand years and the EU is trying to out-do the Romans (by now everyone must be familiar with the Commission's proposal to ban re-fillable containers of olive oil and the subsequent u-turn).

Aside from the self-evidently farcical nature of the proposal, this story does have a couple of broader points about the way the EU works. Firstly, there is the way in which decisions are reached - the so-called comitolgy procedure (see here for a more detailed discussion of this issue). In this case, the proposal was an "implementing regulation" which means no participation from either national parliaments or MEPs, instead the Commission proposal was only considered by a committee of specialists. Incredibly, the Commission does not even to get a majority to back its proposals - its enough that a majority does not oppose them.

Secondly, it shows the huge influence the farming lobby is still able to exert on Brussels (its worth noting the original proposal only encouraged a ban - it did not mandate it). The reaction of Copa-Cogeca, a farming association including large-scale olive oil producers who would have benefited from the ban threw its toys out the pram, with the general secretary Pekka Pesonen claiming that "It is totally unacceptable that the Commission has done a complete U-turn and has succumbed to political pressure like this."

A lobbying outfit complaining about 'political pressure'? Could be the new definition of irony.

What's more, we note that the Commission did at least succeed in one of its objectives. According to an official "The criticism was universal and came from consumers and restaurant owners in all EU countries". So finally a united Europe!

At the same time though, the Commission's climb down shows that a rethink of silly ideas and proposals in Brussels is possible. The Commission could've stuck to its guns and ignored the complaints - after all, there were some actors in favour of this (farming lobby, some member states etc.) - but reason was allowed to prevail.

One of the issues with EU policy is that it too often suffers from a public choice problem - the benefit of a measure driven by rent-seeking is concentrated on a small, well organised group (the farming lobby in this case) but the costs are spread out over a much larger, but poorly organised group (consumers in this case).

The Commission's welcome U-turn on this ban shows that this public choice dilemma can be broken, if the second group can get its act together.

Is the UK winning the argument on EU regulation?

Yesterday afternoon Open Europe hosted Business and Energy Minister, Michael Fallon MP, the man responsible for pushing the UK's 'smarter regulation' agenda in Brussels. This is a subject close to Open Europe's heart as we have produced a number of highly detailed reports on the cost of EU regulation - £124bn gross between 1998 and 2010.

In his speech, Fallon argued that while the single market had the potential to be the "greatest platform for economic growth", overly burdensome regulation coming from the EU was choking off potential jobs, growth and competitiveness, and as argued by David Cameron in his EU speech, Europe could not afford this in the global context. "The burden of unnecessary costs" was carried more heavily by Europe than by its competitors, he said.

He argued that this burden falls particularly hard on SMEs, citing a consultation which found that many had to employ a dedicated member of staff simply to process the workload stemming from the EU's REACH (Registration, Evaluation, Authorisation and Restriction of Chemical substances) Directive. Other areas of EU legislation identified as particularly onerous were the Working Time Directive, the Agency Worker's Directive and other social and environmental rules.

During the Q&A session he pointed out that leaving the EU was not a panacea - as UK companies exporting to the EU would still have to comply with many of these regulations without having any say over them, something currently vexing the Norwegians (see here for a more detailed look at this issue).

Fallon argued that progress had already been made on over-regulation on both the UK and EU fronts, pointing to strong support from other member states including Germany, which resulted in the recent letter signed by twelve member states calling for a reduction in the overall EU regulatory burden. Fallon pointed out that as a result of the crisis, many member states had become a lot more receptive to UK-style reforms, with France and Poland adopting a 'one in, one out' approach to regulation based on the UK model. He was also hopeful that Mediterranean countries would become allies in this fight given their need to restructure their economies and said he was disappointed they had not done so already.

On the UK front, Fallon claimed that the coalition's six-point transposition plan for EU laws had resulted in the elimination of costs associated with gold-plating, i.e. that when adopting new EU laws, the UK would only impose the minimum standards necessary to comply.

However, as Fallon acknowledged, there is still more to be done, arguing for example that EU impact assessments ought to be independently verified, and that a "cultural shift" needed to take place in Brussels.

From Amsterdam to Brussels with love?

Events may have conspired to prevent David Cameron from delivering his Europe speech in Amsterdam as originally planned but it has still managed to create political waves in the Netherlands.

It is rare for statements from foreign politicians to be the focus of parliamentary debates but last night the Dutch Parliament held a debate specifically on Cameron's speech. Halbe Zijlstra, the parliamentary faction leader of PM Mark Rutte’s VVD party argued that “Cameron’s speech is a more extensive version of the European chapter of the Dutch coalition agreement.”

The relevant section of the Dutch coalition agreement reads:

"The Netherlands asks the European Commission to inventarise, on the basis of subsidiarity, which policy areas can be transferred to national authorities and will put forward such proposals itself."

Indeed Rutte has himself quipped that what will take Cameron two years (i.e. the FCO's Balance of Competencies Review), will take the Dutch Cabinet 6-7 months. Last week, in a joint letter together with Finance Minister Jeroen Dijsselbloem, Rutte also reiterated the VVD/PvdA coalition’s desire for member states to have the right to opt out of individual EU policies, such as the Schengen zone and the eurozone, or from the EU altogether.

Yesterday, in an effort to apply pressure on the coalition in this area, Sybrand van Haersma Buma, the leader of the centrist Christian Democratic Party (currently in opposition but historically a party of government), claimed that “Europe is indulging too much in all kinds of over-detailed rules”, and put forward his party’s own detailed list of areas in which Brussels should not be involved:

- Nitrates Directive
- Air Quality Directive
- European Soil Framework Directive
- Home Energy Labels
- Freedom of the press
- Occupational Pensions Funds Directive
- Income limit for social housing rent
- Family reunification for immigrants (point system)
- Internet cookies regulations
- Public procurement of small building projects
- Maternity leave
- Ministry of Transport tests
- Female quotas on EU company boards

This is going much further than Cameron, who did not present a ‘shopping list', only mentioning general policy areas such as social and employment law and environmental legislation. Interestingly though, many of the above fall into those two categories. Specifically addressing Cameron's position, Buma said:

"He's right…let's go back to what Europe was originally all about...What I want is for several countries to decide together that [certain] matters can better be regulated domestically. A Europe à la carte isn't a good idea…We must get rid of the idea that if you want less Europe, it means you're against Europe from the start."

This is set to increase the pressure on the VVD-PvdA coalition which will try to agree in the coming months on their own list of policy areas which should be dealt with nationally, and which the government can use as the basis for any negotiations in Brussels. PvdA MP Michiel Servaes reacted by saying that Buma was only “following the line set out earlier by the cabinet", but that Buma's list was "a big leap" which ought to be carefully considered and discussed with other countries.

Meanwhile, on his Elsevier blog, Dutch Professor Afshin Ellian, a well-known political commentator, described Cameron's stance as "a third, more pragmatic way between europhobia and europhilia", while in a letter to NRC Handelsblad, nine prominent Dutch professors and academics argued that in order to bridge the gap between EU centralisation and EU citizens, the Netherlands should also have a referendum on its future in the EU, an option supported by 52% of Dutch citizens according to a recent opinion poll.

As we suggested in our analysis ahead of last September’s Dutch elections, in the medium to long term the Netherlands “could well be on the path to becoming a more assertive – and far more complicated – EU partner.”

Another cold front on the way from Europe?

Ofgem's 'Electricity Capacity Assessment', published today, makes for some interesting reading as we enter the winter.

This is from the executive summary:

The high level of spare capacity in the GB electricity market is set to end quite rapidly over the next few years. As identified in our 2009 Project Discovery analysis the impacts of replacing older coal and oil power stations under EU environmental legislation together with changes to the generation mix over the next decade pose new challenges to security of supply. Recent developments have strengthened this view. Indeed, power stations 'opted out' under the [EU's Large Combustion Plant Directive] are using up their running hours faster than expected: most LCPD opted out plant will come off the system well before the 2015 deadline.

In short, a mixture of EU environmental legislation and a change in the UK's energy mix, also driven in large part by EU renewables targets, means that the UK's spare energy generating capacity could fall from 14% now to only 4% in three years, under Ofgem's baseline scenario. The graph below shows that in a 'high winter peak demand' scenario, the situation could get far worse, with the UK having no spare capacity in 2015/16, which could very likely to lead to blackouts.

So, as well as trying to get a lot more gas and nuclear power stations built, the UK Government may also need to choose between complying with EU environmental legislation and keeping the lights on.

EU ironies: The Troika meets the Working Time Directive?

Oh the irony. The EU/ECB/IMF troika are now working their ever living tails off to push the Greeks and Portuguese towards more flexible labour markets, and less top-down regulation – and the European Commission is, in parallel, putting pressure on Italy and Spain to do the same. Simultaneously, however, the same European Commission is clinging on like a leech to the most top-down piece of labour market law imaginable (well almost): the EU’s Working Time Directive (WTD).

Well, these twin efforts might now be heading for a clash. Reports floating around yesterday suggested that the EU/IMF/ECB troika wants Greece to do more to flush out its rigid labour market by, amongst other things, raising the maximum number of working days per week to six. The reports are still sketchy - supposedly from leaked emails – so should be taken with a pinch of salt. Still, it paves the way for a pretty weird situation.

The leaked plans suggested the troika would demand the following to boost flexibility of labour arrangements:

• Increase the number of maximum workdays to 6 days per week for all sectors.
• Set the minimum daily rest to 11 hours.
• Delink the working hours of employees from the opening hours of the establishment.
• Eliminate restrictions on minimum/maximum time between morning and afternoon shifts.
• Allow the consecutive two week leave to be taken anytime during the year in seasonal sectors. 

Now the Working Time Directive:

• A maximum working week of 48 hours
• A rest period of 11 consecutive hours a day
• A rest break when the day is longer than six hours
• A minimum of one rest day per week 

In addition, a range of ECJ cases have extended the scope of the WTD even further (sick days spent on holiday can be reclaimed, doctors who sleep on-call are actively working etc).

The latest Troika plans, if true, would not break the WTD it seems, but they’re clearly taking Greece to the limits of what is permissible under EU law – lest they want to push Greece to seek a UK-style opt-out from the WTD (leading to a bizarre scenario, whereby the Commission urges an opt-out from its own rules). One step further and the acquis communautaire would get in the way. In addition, a hardworking Greek who wants to follow the Troika’s recommendations by putting in a six day working week, better be sure to clock out right on time, after eight hours have gone by, or he would be engaging in activities illegal under EU law.

This raises a second question: if the Troika was tasked with working out a competitiveness plan for the entire EU, would the WTD – and many other onerous EU regulations, and the EU budget for that matter – survive?

We suspect not.

Cable gets it 100% right on EU regulation (almost)

Vince Cable: Unimpressed by the Working Time Directive

In a nice contrast to the doom, gloom and cynicism which all too often characterise the European debate, here's some much needed can-do spirit from UK Business Secretary Vince Cable. The topic - how to cut down on EU regulation - is a favourite of ours (sad, we know). In a piece for the Telegraph, Vince described a recent meeting in Vilnius, where, apparently, 15 member states, going under the catchy name of the "Like Minded Group", agreed to work towards less cumbersome and more business friendly EU regulation.

Cable attacks the "dreadful economics" and "illiberal" nature of the Working Time Directive in particular and EU social and employment laws in general (at least by implication). But he concludes "the tide is turning":

"Beyond the Like Minded Group, Spain and Italy want the EU to focus more single-mindedly on a growth agenda, including deregulation. Last November the European Commission agreed to attack the regulatory burden with exemptions for micro businesses. And earlier this year, following sustained UK lobbying, we achieved agreement in Brussels to exempt around 1.4 million UK small businesses from burdensome EU accounting rules...I discovered in Vilnius that we are not on our own. We are part of a new progressive European majority replacing the dinosaurs of the past."

This is good stuff, and as we have argued repeatedly, exactly the type of measures that the UK Government should push for (nicely tying in with our piece, also in today's Telegraph, on how the UK should be actively courting Germany in a bid to put free trade at the heart of what the EU does).

However, Cable also rules out a scenario is which the UK "could carve out a comprehensive opt-out of all EU employment legislation", saying that "in practice it is difficult to see how Britain could on the one hand continue to enjoy the benefits of the Single Market, worth £3,500 a year per UK household, while on the other refusing to engage on difficult issues."

It's of course true that it would be politically very difficult to get a carve-out from EU employment law. It's also true that EU employment law acts as a 'subscription fee' for the UK's participation in the single market. But as we set out in our recent paper on EU employment law, where does that argument take you? Should the UK then accept other sub-optimal policies such as the CAP and CFP as that, after all, is part of the 'package deal'.

This position also assumes that EU membership for the UK (and other member states) is "Pareto optimal" i.e. there's no other possible outcome of European cooperation that makes every member state at least as well off and at least one member states strictly better off. Looking at how well Europe is working at the moment (ehum), that is clearly not the case. It's therefore right for the UK to consider the division of labour between member states and the EU in employment law - and other policy areas as well.

But in any case, it's a positive that Cable and the UK government are active in this area. Lets hope they keep up the good work...

A useful lesson as to why the EU shouldn't decide who has access to our phone and internet records

So, the Coalition seems to have backed down on imposing new powers over internet surveillance, opting for a 'consultation' on draft plans, rather than pushing for a full Bill.

Although the exact proposals remain unclear, the Coalition seemed to be gearing up to extend the current rules on the retention of and access to communications data (the destination of phone calls, emails and websites visited, but not their content, is already recorded and stored for 12 months by UK law).

So what's the EU angle, because invariably there is one?

The requirement for service providers to retain this data are laid down in the EU's 2006 Data Retention Directive. We looked at the Directive and various other surveillance-type EU proposals in this report in 2009. But it should be noted that the previous UK Government was a co-sponsor of the initial EU proposal when it was first tabled in 2004 and, following the 2005 London bombings, was a strong supporter of the rules.

The Coalition's new proposals, which it seems likely to continue pushing after this storm has died down, would use additional UK legislation to extend the data collected to cover contacts made via social networking, and potentially even online video games. But, arguably the most controversial proposal is to allow intelligence officers to access emails, calls and texts as they happen in 'real time', without a warrant, rather than retrospectively.

This all goes beyond the current EU Data Retention Directive, which is basically limited to the retention of data on landline calls, mobile calls, emails and web history. The current Directive also leaves it up to member states to decide how and when law enforcement authorities can gain access to this data. So don't blame the EU in other words.

But this is not necessarily the end of the story. The European Commission plans to make a proposal for an amended Data Retention Directive this year.

And crucially, the Commission's 2011 evaluation of the current Directive stated that:

The Commission will assess the need for, and options for achieving, a greater degree of harmonisation with respect to the authorities having and the procedure for obtaining access to retained data. Options might include more clearly defined lists of competent authorities, independent and/or judicial oversight of requests for data and a minimum standard of procedures for operators to allow access to competent authorities.

In other words, law enforcement authorities' access to retained communications data could be something that will be regulated by the EU in future, if the Commission opts for this approach and gets support from member states and MEPs.

What this would mean for the UK in practice is not entirely clear because the UK is often rather more keen on state snooping than other EU states (e.g. Germany, which doesn't implement the original directive after its Constitutional Court struck it down). It is therefore unlikely that the EU minimum standard for law enforcement access to data would go beyond current UK practice or what the Coalition is trying to do in future.

However, this week's media storm over how much access the state has to our personal data shows that the principle of allowing the EU to determine which authorities have access to our personal data, and when, could create huge political issues in the future. How would politicians like to tell their voters that in fact it is the EU that decides on who and how police forces can access their data?

One thing that this week has surely taught us is that this is something that should be decided nationally, where if the one government decides to make authoritarian assaults on civil liberties they can at least be overturned by future governments or rethought due to public pressure. Not so once an EU directive is in place and it requires the re-opening and successful conclusion of negotiations between 27 member states and 736 MEPs.

It will interesting to see, following this week's storm in Britain, what the Commission will propose.

Who were the naughtiest Europeans of 2011?

No, this is not another one of those taxpayer funded EU awards. This is about what takes place beyond the rhetoric, political horse-trading and posturing amongst ministers and diplomats in Brussels. This about the tiny matter of actually implementing the measures that you've agreed and signed up to. Surely, that must constitute a key qualification for being a good European?

The European Court of Justice (ECJ) has just released its annual report of activities for 2011, and a specific graph caught our attention:

The graph illustrates the number of "Judgements concerning failure of a member state to fulfil its obligations" - in plain English, the number of times a country either broke or refused to implement EU law. We note that ten member states, including countries as diverse as the UK, Bulgaria, Denmark, Latvia and Slovakia, ended 2011 with a clean sheet. Gold stars to them.

In contrast, Belgium was the naughtiest EU member state of last year, with the ECJ ruling against the country for failing to implement EU law no less than nine times. Various southern European countries were pretty naughty too: Italy and Portugal were slapped with eight rulings each, and Spain seven. France and Germany were both pretty naughty Europeans as well, losing six and five cases respectively, while Greece lost four.

Taking the longer view, the picture looks worryingly similar. Between 2007 and 2011, the UK lost 14 court cases for failing to implement EU law, while Germany lost 25, France 36, Spain 56 and Italy 66. It is also noteworthy that the newest member states are much better at implementing EU law than the EU's founding members.

We cannot help but to flag up the irony at play here. Countries that have traditionally put themselves forward as champions of European integration have a pretty appalling record in abiding by EU law. While this is nothing new, it should nonetheless challenge lazy assumptions and labels such as being "good" and "bad" Europeans.

A bit like the "good citizen" being defined as someone who is excellent at dreaming up new laws but with a terrible habit of then breaking them.

Isn't a good European someone who wants the EU to regulate far less but far better and with far better and pointed implementation of the laws that are agreed? Someone who wants a slimmed-down EU based on substance rather than one based on rhetoric?

We know the answer, do you?

So what does business really think of Cameron's veto?

Cameron's use of the veto at last week's summit, in order to seek a level playing field in the single market, allow for stricter bank capital rules and unanimity on the transfer of powers to the EU's financial supervisors, has been followed by the usual arguments that the business community is concerned that the UK will be isolated (see here why the issue is slightly more complicated than that) and that it fears for the UK's place in the single market.

This 'argument by anecdote' is one that we've heard so many times before, and the last few days has seen a number of exponents of it.

Monday's FT reported that:

"while others within the banking community and beyond said the decision risked destroying the country’s position as Europe’s pre-eminent financial centre."

The Observer added:

"It was hard to find many business voices supporting the decision this weekend"

Michel Barnier, the European Commission for the Internal Market and Services had a piece in the Telegraph today, in which he argued that:

"It seems clear to me that the City's interest is in a truly single European market, not a fragmented patchwork."

Hosting a breakfast for Nick Clegg this morning, Philip Souta, BNE's genial Director, said he believed Cameron "did the wrong thing in using the veto" and BNE chairman Roland Rudd chimed in:

"Business clearly wants a deepening and widening of the single market and that is what our message is in terms of wanting to see greater reforms. We are not defending the status quo, we are trying to see a changed and reformed Europe."

Yes, of course we're all in favour of trade and growth, but let's think a bit deeper about this. Cameron's efforts last week, whatever you make of the tactics and if he asked for the right thing, were an attempt to achieve reform in Europe, through more local ownership of supervision and capital rules for banks, for example.

So surely, what's interesting is what business really thinks about the basic aims. And what does it actually think about the single market? Well, you're in luck, because this morning we published a new ComRes poll designed to inject some substance into a debate that has so far been based on hearsay.

Now, as we know how the following 'inconvenient' findings tend to rub some people the wrong way, a couple of qualifications:

• 500 financial services professionals were polled between 28 November and 7 December, before last week’s EU summit. So this poll is about the general sentiments on the EU negotiations, a UK 'veto' over financial services and attitudes to the cost/benefits of EU rules and market access.

• At Open Europe we maintain that access to the single market has by and large been beneficial for UK businesses, which is why we were very surprised to see such a large share in the business community expressing such qualified support for it.
  

• We were keen to qualify our key 'veto' question by flagging up that such a tactic could compromise market access. This point is vital, as a substantial chunk of the media narrative in the last few days has been that the business community now perceives itself as worse off than before the summit (again, this is the narrative not necessarily the reality). But our poll would suggest that this is a risk that businesses are actually willing to take - which again, surprised even us.
  

With that out of the way, here are the main findings:

- Overwhelming support for a UK veto on EU financial regulation even if it reduced market access to the EU: The ComRes survey finds that 69% of financial services professionals say that they would support the UK having a veto on future EU financial regulation and other financial measures, even if it risked reducing their firm’s market access to one or more EU countries.

- Concerns about the cost of EU regulation: The poll finds that 56% of financial services professionals think that, on balance, the costs of EU financial regulation currently outweigh the benefits of the Single Market to the City, while 31% disagree. Over the next five years, 62% expect the costs of EU regulation to outweigh the benefits of the Single Market, while only 24% disagree.

- 70% think the UK should renegotiate the EU Treaties to safeguard the City: While the Single Market is seen as important, surprisingly, a full 70% think that the UK Government needs to renegotiate the existing EU Treaties to safeguard the City of London, limiting agreements to trade and association only.

- Eurozone-only financial transaction tax (FTT) would have a negative effect on finance firm’s UK operations: Given that the UK and other non-euro countries are opposed to an EU-wide FTT, the likelihood of a eurozone-only FTT being proposed has increased. If the eurozone went ahead with its own FTT, without the UK, finance professionals think this would still have a negative effect on UK firms. 55% say it would have a “negative effect” on their UK operations. If an EU-wide FTT, including the UK, was introduced, 48% of financial services professionals say they would consider moving some of their activities to outside the EU.

- UK regulators are perceived to have a better understanding of financial markets than EU regulators: In contrast to EU-level regulation, financial services professionals are less likely to agree (40%) that the costs of UK-derived Financial Services Authority (FSA) regulation outweigh the benefits, than disagree (47%). Only 22% of respondents agreed that the EU institutions have a better understanding of how financial markets operate than the UK’s FSA, while 62% disagree.

As our survey and the graph above clearly demonstrate, in financial services in particular, a key sector of the UK economy, a majority already believes that the cost of complying with existing and new EU regulations outweighs the benefits of access to the single market. And even more are concerned that this will be the case in five years time.

See a full summary of the poll here.